How austerity became the root of all evil

Francois Hollande won the presidential election in France with 51.6% of the votes and is currently bracing himself to meet Angela Merkel – a meeting that promises to be quite awkward. It will take the austerity vs growth debate that Europe’s newspapers are repeating since the beginning of the year to another level (see Jeffrey Sachs article below). But even though Hollande wants to fight the Greek fight against austerity,he too will have to manage a budget. According to Reuters, 28% of France’ national income flows towards welfare, which is more than in any other Western nation. Maybe it’s time to introduce a buzzword like ‘sustainability‘ to the debate.

In Greece (I legitimately just wrote ‘Freece’), the confusion starts on a much more fundamental level, with the actual outcome of the vote. Antonis Samaras’ New Democracy party did get the biggest share of votes, but couldn’t find a playmate to form a coalition with. So that failed. Next in line was Synaspismos, radical left wing party led by 37-year old (!) Alexis Tsipras, which came in second. But Tsipras doesn’t believe in bailouts, which alienated the communist party and ruined his chance to build a left wing coalition. After Synaspismos, which is expected to fail at forming a government within the next few days, PASOK, the socialist party, is up to try its luck. read article

The bottom line is, Greece will have to hold new elections, possibly on June 17. On the one hand, that’s good, because at least nobody can renegotiate the fiscal agreements with the EU until then. On the other hand, it’s bad, because nobody can negotiate new agreements with the EU until then. Your pick. read article

Jeffrey Sachs, smart man and economist, seems to be annoyed with the whole austerity debate mentioned above, and gives a very basic lesson in economics to explain the on-going discussion among European politicians. read article

Meanwhile, Spain has decided to back Bankia SA, conglomerate of regional banks, established just about 1.5 years ago, with €7-10bn. As so much of Spain’s banking problem, Bankia’s issues are related to the country’s real estate bubble. WSJ reports that the government is also working on a program that lets banks write off their bas real estate assets.

Again, it looks like things will get worse before they get better.

Before all this happened, last week Thursday, Jacques Delors, Javier Solana, Ulrich Beck and Daniel Cohn-Bendit, a bunch of politicians/academics formerly, currently or conceptually involved with the EU, wrote an open letter to the Guardian. The letter is a call for a more social Europe, a Europe of the people that doesn’t rely on elitism and technocrats; it doesn’t use the words ‘austerity’ or ‘bailout’. One sentence reads

No progressive thinker – from Jean-Jacques Rousseau to Juergen Habermas – ever wanted democracy to consist merely of being able to periodically vote.

And this is coming from a politician whose very title reads ‘representative’ (Javier Solana is EU High Representative of Common Foreign and Security Policy). So what’s it going to be then, eh? Is this a call for direct democracy? In a 27-nation union?? In the end, this letter is worth reading, if only to disagree with it. read article